Banking on a union: the politics of changing eurozone banking supervision

Abstract:

In 2012, the European Union (EU) adopted a transformational change to its banking policy for the eurozone. It replaced the policy model of decentralized supervision and regulatory competition between countries with a single supervisor and a more harmonized approach. Transferring banking supervision to the European level also alters the constitutional order. The process of this transformational change was rapid and highly political, which was different compared to earlier incremental changes. Kingdon's model whereby policy entrepreneurs seize opportunities when the independent streams of solutions, problems and politics converge partly explains the process and timing of this transformation. The study of EU banking policy suggests, however, that the multiple streams framework should pay more attention to the way in which entrepreneurs engineer fluctuations within the streams and thereby contribute to creating opportunities for change. This article identifies the supranational European Central Bank as an effective entrepreneur which also played an active role in political bargaining.